Weekly market update - Tariffs and trade - trouble ahead?

Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US and Asia.

Key market events 

❌ EU pauses rate cutting cycle – The European Central Bank left interest rates unchanged at 2%, after making 8 cuts over the last year as it faces growing trade and tariff uncertainty.

✅ US-Japan trade agreement – the agreement set a tariff on the country at 15%, including the auto industry. This offers Japan relief for this key export sector against a threatened 25% rate. 

📉 UK retail sales disappoint – sales rose by a sluggish 0.2% in Q2, despite June’s warm weather causing a partial rebound on stronger clothing and food spending.

🔻German confidence falls – German consumer confidence fell to -21.5 in a forecast for August, falling below expectations to hit its lowest point since April, as consumers preferred to save than spend amid US tariff concerns.

🗣️ Microsoft hack – an organisation managed to exploit weaknesses in Microsoft’s SharePoint system to access business and government data in the US, including the organisation tasked with safeguarding their nuclear weapons. The extent of the breaches are still largely unknown.

While the US administration promised 90 trade deals in 90 days before universal ‘reciprocal’ tariffs were imposed, Japan marks only the 5th such agreement to be reached (alongside the UK, Vietnam, Indonesia and the Philippines) ahead of a new 1st August deadline. Two of the US’s largest trading partners, China and the EU, are yet to formally agree any deal. Long running negotiations continue with the EU, who’ve threatened heavy retaliation if agreements by the deadline are not met, while a temporary postponement with China is set to end imminently.  

However, the US isn’t the only country seeking new trade agreements. The UK is formalising its own free trade deal with India, as the EU also works to reach a trade agreement with China.

So much uncertainty can negatively impact consumer and business confidence. The sooner clarity is provided, the sooner they can plan and invest for the future.

Chart of the week - UK employment highs

Source: Bloomberg, Office for National Statistics, non-overlapping 3-month averages.

Data to the end of May, shows the UK unemployment rate rose to 4.7%. This brings joblessness to a 4-year high, touching levels not seen since the depths of the Covid pandemic. Some of the biggest contributors to this rise, came after cut-backs following government announcements of a rise in employer national insurance rates, and a jump in the minimum wage. When combined with falling pay growth and rising national debts, not to mention geopolitical concerns, it paints a less than rosy outlook.

However, the good news for investors is that economy and market don’t always move in tandem due to factors like sentiment, differing sector focuses and overseas revenue sources. Year to date, the UK market is looking a lot more positive, with the FTSE 100 reaching record-highs to keep pace with a surging Europe and substantially outperforming the US.

UK market success 

Despite UK growth concerns, markets rose on relative insulation from US tariffs and hopes of further Bank of England interest rate cuts, which alongside strong bank earnings, helped the FTSE 100 reach another record high this week.

US stalls 

Strong tech results and the agreement of several new trade deals provided some positive US momentum, although investors remained concerned about the looming August 1st tariff deadline amid a stalling of progress elsewhere. 

Asia buoyed by US trade-hopes

The Nikkei saw a substantial rise (in GBP terms) after its US trade deal was announced with lenient terms for its key auto industry. The Hang Seng also gained on hopes the US could also finalise a China trade deal, despite much uncertainty remaining. 

Oil and gold prices flat

Oil saw little movement over the week, as falling global demand countered continued tensions in the Middle East. Gold also saw a marginal rise on its safe-haven status and the prospect of US interest rate cuts later in the year. 

Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 24^th July 2025.

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